The NHS could save up to £165m a year by using ambulances more efficiently and measuring performance more accurately, according to the National Audit Office.

A NAO report has found that the performance of the ambulance service over the last decade has been driven by response time targets and not outcomes. The 8-minute response time target has skewed the ambulance services' approach to performance measurement and management. This has led to practices such as the over-allocation of vehicles to meet targets.

The NAO welcomed the move in April 2011 to make the response target a part of a range of indicators designed to encourage a broader, outcome-led performance regime. The report warns that in order for this to be an accurate measure, trusts and accident and emergency departments will need to share data with the ambulance service.

The watchdog also found that there are wide variations in the costs per incidents between different trusts, ranging from £176 to £251. The report estimates that if all 11 trusts adopted best practice in utilising other clinical services, such as caller health advisers and sending patients to minor injury units, the NHS could save £165m a year.

The NAO emphasised that achieving efficiencies across the ambulance service will require strong leadership. Improving trusts' performance has previously been hampered by a lack of data. The Health Department is urged to put robust measurements in place to ensure the new quality indicators are accurately monitored so that benchmarking can be done.

Margaret Hodge said: "We will scrutinise the role of the department, including how it intends to achieve better integration of ambulance services with other parts of the emergency care system in order to deliver great cost-effectiveness."